Q. I am wondering if we can contract with employees to resolve employment-related disputes, including statutory claims, with binding arbitration. Are there any problems with this?
A. Arbitrating disputes as opposed to litigating them in court can be very appealing for employers. Benefits include faster resolution, less expense than litigation and protection from exceptionally high jury verdicts.
Case law has established, at least in some jurisdictions, that statutory claims may be the subject of an arbitration agreement. While employees can prospectively agree to have their claims heard by an arbitrator rather than in court, they cannot contract away their statutory rights.
The U.S. Supreme Court has found that “an employee’s rights under Title VII may not be waived prospectively.”
Also, some courts will not enforce an arbitration agreement that limits statutory remedies.
For example, because Title VII permits employees to recover attorneys’ fees if they prevail in court, many courts will not enforce an arbitration agreement that requires each party to assume their own litigation costs.
Ordinary contract principles, derived from state law, also govern whether an arbitration agreement is an enforceable contract. Generally, since employee handbooks are not recognized as contracts, agreements to arbitrate should be made in a separate written document, not lumped in along with personnel policies.